Under the system, introduced by NRMA Insurance in July 2005, smash repairers tender for work from the NRMA by assessing damage via online images.

Richard Torbay, an independent MP from the Northern Tablelands, will introduce a bill in late March in state parliament imposing jail sentences and penalties of up to A$165,000 (US$121,079) on insurers that use preferred repairers or parts.

NSW Motor Traders Association (MTA) chief executive, James McCall said the matter has so far been "un-negotiatable" and the only way to settle the matter is through legislation, which he feels will easily pass.

"I have said all along this system was producing unsafe repairs and the Stay Safe committee has even recommended the system be scrapped as it produces unsafe repairs; I still believe that to be the case as it is unfair to customers," McCall said.

"With Web-based tendering, our concern is [a repairer] cannot accurately quote on the repair from an image on a Web site and if you had a prang in the back of your car, the smash repairer would not even know of the damage underneath the panels ... I had a fella run into me and I thought it would cost between A$700 or A$800 but it cost thousands, and that was through mate's rates.